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E-Commerce Diplomacy

The most glamorous companies in the e-commerce world may be those that do business only via the Web, such as Amazon.com Inc. and CDNOW Inc. But when it comes to reaching customers in every corner of the globe, old-line companies with substantial investments in brick-and-mortar operations have a decided advantage in successfully fulfilling orders. To meet the challenge of order servicing, many Web-only companies are building infrastructure in several locations or developing a network of partners to ease the logistical and regulatory burdens that plague true global e-commerce. However, manufacturers and other companies that already possess a substantial global infrastructure face another problem: how to avoid antagonizing their existing network of distributors and other partners when they decide to sell products directly from their Web sites. Rockwell Automation, the $4.5 billion maker of automation equipment and related technologies, knew that this would be an issue when it launched RockwellOnline last November. With customers in more than 80 countries and almost 30% of its business coming from outside the U.S., the company didn't want to follow the conventional path of concentrating on the domestic market first and expanding around the globe one region at a time. It wanted immediate global reach. But with more than 500,000 products for sale, often requiring substantial installation, training, and other services typically provided by local distributors, Rockwell knew that it couldn't simply open an electronic store and bypass the thousands of business partners that had helped it become a global power. Rockwell solved part of the problem by deciding to offer only a small subset of its products initially, about 800 software packages, although it plans to expand into certain machine products in the first half of 2000. "Software seemed like a good place to start," says Rod Michael, director of the company's e-commerce team. "It has global appeal and it's small enough to pose very few logistical issues." It's also a product that is relatively easy to price globally, unlike heavy machinery, the price of which may be negotiated from one customer to another. That's not to say it has been easy. "I now know more about tariffs, compliance regulations, export laws, and a dozen other related issues than I ever wanted to," Michael says, only half jokingly. Rockwell has a group of about 70 employees dedicated to the new e-commerce initiative, and has also relied on some forms of outsourcing. "There are now companies that can help you go global," Michael says. "For example, we pay a monthly fee to a company that helps us maintain compliance with tariff regulations around the world. That's a big burden lifted. And once you establish local credit card authorization services life gets easier." More difficult, Michael says, is finding people with the right technical skills to build the back-end e-commerce infrastructure that will lead to true global efficiency. "The front end is easy," Michael explains. "Putting up a site is far less complicated than stitching together all the back-end systems linking you and your suppliers. But the real sweet spot in e-commerce is creating that electronic supply chain, that tight integration that changes how you run the business." Companies now need both a strong brick-and-mortar presence and a sophisticated e-commerce operation in order to succeed, Michael says, and adds that, "If all you've got is the former, don't be discouraged. You can leverage that with new technology and compete much more readily than a company that has to scramble to build distribution centers or otherwise establish a global presence behind its Web site."